Most people don’t consider emergencies until they happen. Imagine if you had a set amount of money for everyday expenses and cover unexpected costs with online payday loan. If that happened, you would have to cut back on non-essentials or risk not having enough to get by.

Planning ahead can help prevent this from happening in the first place, which is why it’s important to have an emergency fund. Having access to savings when an unexpected bill comes up is essential in any financial situation, so it’s a good idea to build one sooner than later.

With that in mind, here are some essential tips for budgeting during an emergency and creating your emergency fund.

Spend less than you earn

This one is so simple, but it’s an often-overlooked tip for saving money. The best way to build up your emergency fund is to contribute to your savings every month.

If you only make $2,000 per year, you can contribute $200 and build up $8,000 in just over two years (assuming a 12% return). This is a common savings goal, but it’s not really that helpful.

In the event of an emergency, you’ll have to come up with a lot more than the next two years. Instead, make it your goal to save less than you earn.

Set savings goals

As with any goal, setting savings goals can help you track your progress and help you stay motivated.

Once you’ve budgeted for your expenses and have a little money saved up, set a savings goal for a different amount. For example, if you want to aim for $5,000 in your emergency fund, set a goal to save $500 per month for three months.

This will help you stay motivated because now you’re saving for a specific goal, rather than just saving money for a rainy day.

Make a list of all your expenses

This is a tip that should go without saying, but you’d be surprised how many people don’t actually write down all their expenses.

Listing everything you’ve spent will make it easier to budget, because you’ll know exactly where your money is going. This will also help you spot any areas where you could be spending more than you need to. For example, if you always buy coffee every morning, you’ll know that you’re spending too much money on this habit alone.

This is possible because you don’t really know how much you’re spending. With a list in front of you, you’ll be able to identify any areas where you’re spending money that you don’t need to.

Create an account for your emergency fund

This tip is similar to the one above, but for your savings account. If you’ve already decided to have an emergency fund, it’s time to set one up. You can either open a new account or move your existing one to a different provider.

This will help you track your expenses and keep an eye on how much you’re spending on your account. You can also use online budgeting tools like Mint or You Need a Budget to help you track your spending.

This will make it easier to spot any areas where you’re spending too much money.

Diversify your investment

Even the most well-rounded retirees can’t expect to beat the market every single month. However, by investing in a few different types of investments, you can lower your risk and increase your potential return.

Look for investments that have a low risk of losing money, but are also likely to gain money. One example is a government-backed investment like a GIC (a guaranteed investment certificate).

Another option is a low-risk investment like a balanced fund, which has a mix of stocks, bonds, and cash. By diversifying your investments, you’ll keep your losses to a minimum while also increasing your potential return.